The arrival of Danish distribution powerhouse Dangaard had been mooted for some years, prompting trepidation and even pre-empted defensive strategies from the UK incumbents.
Dangaard was swallowed up by American firm Brightpoint in February 2007, and the potential for a UK arrival for the newly expanded group became more likely.
Mobile had trailed the ambitions of Dangaard for years with continued speculation of a UK move and the looming threat to the likes of 20:20 Logistics and Data Select. Dangaard steered clear, viewing the UK as too competitive and impossible to make an impact without buying an established distributor.
The Danish management team always complained that the valuations UK distributors put on themselves was too far from what they considered ‘realistic’, so a UK arrival failed to materialise.
When Brightpoint did arrive this year through the acquisition of IT and fixed-line distributor Hugh Symons Telecom (exactly 12 months after the Dangaard purchase), the noise couldn’t have been more low key.
It was surprising, given the hype around fellow American rival Brightstar, that there was little talk of Brightpoint’s arrival, especially given that it forked out $308m for the Dangaard deal, and the group registered combined revenues of $4.6bn, and $106m profits in 2006.
One of the most fascinating points was Brightpoint’s chosen acquisition target: Hugh Symons Telecom (HST). The clear indication was that Brightpoint saw the real potential in IT/mobile convergence.
At the helm of the new group is HST’s former owner, Hugh Roper, who had previously sold his mobile airtime business, Hugh Symons Communications (HSC), to Carphone Warehouse for what is believed to have been £10m - £5m upfront, and a further £5m through an earn-out agreement. Roper is staying on this time, and has a vested interest to shift the Brightpoint business up a gear.
‘No-one else has a foot in IT and mobile’
Roper has Brightpoint’s former Sweden MD, Ulrich Egeskov, as his COO for the UK business, and has previously said that, in time, the business will compete with the big distribution giants: Brightstar, 20:20 and Data Select. It also wants a slice of the airtime market, but the immediate focus is the rapidly growing IT/mobile distribution sector. It puts Roper up against Avenir, his old company HSC, smartphone firm Portix and IT distributors such as Ingram Micro.
Roper says: ‘No-one has got a foot in both sides [IT and mobile] with the level of sophistication we offer to the airtime channel.
‘Our plan is to help the operators support the emerging channels in the industry.’
The company already has expertise in IT, fixed line, and airtime, and is looking to boost its hardware operation through Brightpoint’s resources. It has 35 people in the business, including 16 salespeople, and is looking to recruit more.
Roper is known to have strong associations within the network operators from his time as an airtime distributor. One network chief said: ‘He understands the networks’ objectives, they will listen to what he has to say, and he will get in there if there’s an opportunity.’
Roper, meanwhile, says the scale of Brightpoint gives it an advantage over its rivals: ‘Brightpoint adds a degree of credibility and scale that HST couldn’t offer on its own. We’re part of a $4bn distribution now so we can be more ambitious.’
Brightpoint has already moved into a nearby warehouse four times the size of its old operation and has signed the only UK distribution deal with HTC, which it has used to open up retail channels like Carphone Warehouse and Phones 4u.
Becoming the sole distributor of HTC has set Brightpoint well on its way to becoming a strong player in the b2b distribution market.
One source in the distribution community says: ‘The market is looking very promising for Brightpoint, because more and more dealers are now doing smartphones. HTC is what the market seems to want at the moment. There have been quite a few products that have had a real impact on the market, such as the HTC Touch Diamond (below, right) and the HTC Touch Cruise.’
Brightpoint is looking at HTC to be its vehicle to open up critical channels. 20:20 is looking to do the same with its BlackBerry deal, and Brightstar has a similar strategy with its Windows Mobile agreement.
But the HTC monopoly that Brightpoint currently holds has annoyed some in the distribution community, as Brightpoint has been able to dictate the market price for the handsets.
One disgruntled voice in distribution says: ‘At the moment they are in the position of power, but they might have to reconsider their strategy, because they might make a good margin from it but others will lose interest and focus on other smartphones.’
Waiting on Nokia
Although HTC is a significant smartphone manufacturer, Brightpoint would still need to win Nokia and BlackBerry over to be a threatening force.
It is expected that BlackBerry and HTC will open up to more distributors in the coming months, with Brightpoint pitching hard for a deal with BlackBerry’s parent company, RIM.
Brightpoint lost in Nokia’s distribution tender for consumer handsets, but has made it to the final five for the manufacturer’s business deal, and is strongly tipped to win the Nokia distribution licence. It would be a huge coup if Brightpoint was to win a sole business distribution with Nokia, but it would equally be a major loss if it was to miss out and a rival such as Ingram or Brightstar would win sole supplier status.
Brightpoint already enjoys a close relationship with Nokia on a global level, but it is believed that the UK has complete autonomy in making its decision.
One supplier Brightpoint is highly unlikely to win is Samsung. Samsung is understood to have completely ruled out giving Brightpoint a distribution agreement in the UK, and the Korean manufacturer has several smartphones in the pipeline, and has placed former Azurri man Carl Borraman to lead its smartphone business.
However, b2b distribution is moving headlong into smartphones and mobile email. As most of the networks, as well as Carphone and Phones 4u, now offer laptops bundled with dongles, and laptops with embedded Sims are on the horizon, laptop distribution will become increasingly important for the dealers that Brightpoint is targeting.
As a joint venture between IT and mobile distributors, Brightstar, through its joint venture with Tech Data, is in an advantageous position and the company has already won the right to distribute laptops to Phones 4u.
There is also likely to be competition from existing IT distributors. The advantage that distributors in the mobile industry have over their rivals from the IT side is that they have experience in dealing with the networks.
Another distribution source says: ‘There are new opportunities like laptops with embedded Sims cards, but who is going to sell that? Both IT and mobile are suited to, but there is that age old problem: IT distributors would have to get their head around commissions and how to sell tariffs, while the mobile guys don’t understand IT support.’
For Brightpoint, the two big questions are, how big is the mobile/IT market, and how much competition will it have?
The distributor source says: ‘I’m not sure how many early adopters there are in the dealer channel. The investment to selling laptops is very high for dealers.’
The attraction to the sector is that it is high margin in contrast to general distribution, and it requires a level of expertise that Brightpoint can charge more for, and it will ward off rivals and keep customers and suppliers tied in.
This fact has not gone unnotic